TABLE OF CONTENTS
Declaration ........................................................................................ i
Approval. ......................................................................................... ii
Dedications ..................................................................................... .iii
Acknowledgement .............................................................................. iv
Table of contents .................................................................................. v
List of tables ..................................................................................... viii
List of figures .................................................................................... ix
Abstract ........................................................................................... x
CHAPTER ONE INTRODUCTION ............................................ . 1
1.0 Introduction ............................................................................. 1
1.1 Background ............................................................................. 1
1.2 Statement of the problem ................................................................. 2
1.3 Purpose of the study ................................................................. 2
1.4 Objectives of the study ................................................................ 2
1.5 Research questions ................................................................. 3
1.6 Significance of the study .................................................................. 3
1.7 Scope .................................................................... 3
1.8 Conceptual framework ..................................................................... .4
LITERATURE REVIEW
CHAPTER TWO ......................................................................... 6
2.0 Overview of credit policy in microfinance institution .................................. 6
2.1 Related literature ........................................................................ 6
2.2 Credit risk model ........................................................................ 7
2.3 Consumer bank credit ....................................................................... 8
2.4 Importance of credit ....................................................................... 9
2.5 Credit policy ........................................................................ 10
2.5.1 Credit standards and analysis ........................................................... 10
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2.5 .2 Credit te1ms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5.3 Determinants of credit terms in commercial banks ..................................... 11
2.5.4 Collection policy ........................................................................... 11
2.6 Effects of credit on performance of commercial banks ................................. 12
2.7 Functions of credit management policy in the economy ................................. 13
2.7.1 Reducing the rate of defaulters ............................................................ 13
2.7.2 Maintains stability .......................................................................... 14
2. 7 .3 Maintains a favorable spread .............................................................. 14
CHAPTER THREE RESEARCH METHODOLOGY .......................... ... 14
3.0 Introduction ................................................................................ 14
3.1 Research design ............................................................................. 14
3 .2 Research Population ....................................................................... 14
3.3 Sampling design ............................................................................ 14
3.3.1 Sample size ................................................................................ 15
3.4 Data source, collection methods .......................................................... 15
3.4.1 Data source ................................................................................... 15
3 .4.2 data collection procedures ................................................................. 15
3 .4.2.1 Questionnaires method ................................................................... 15
3.4.3 Data Processing and Analysis ............................................................. 16
3.5 limitations of the study ........................................................................ 16
CHAPTER FOUR
PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS ... ............. 17
4.0 Introduction ................................................................................... 17
4.1 Bio data ........................................................................................... 17
4. I. 1 Respondents designations .................................................................... 17
4.1.2 Respondents by age, sex and education level. ............................................. 18
4.1.3 Length of service .............................................................................. 22
4.2 Credit policy in Equity Bank .................................................................. 23
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4.2.1 Credit policy review ........................................................................... 27
4.2.2 Credit evaluation in Equity Bank ........................................................... 29
4.3 Credit rating ..................................................................................... 30
4.3.1 Response on factors on assessment of credit facility ....................................... 32
4.3.2 Response on credit recovery approach ...................................................... 35
4.4 Response on duration given to borrowers .................................................. 36
4.5 Effects of credit policy on the banks performance ......................................... 39
CHAPTER FIVE
DISCISSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ... .41
5.0 Introduction .................................................................................... .41
5.1 Discussion offindings ....................................................................... .41
5.1.1 Bio data ...................................................................................... .41
5.1.2 Credit rating ................................................................................. .41
5.1.3 Credit policy ................................................................................ .42.
5 .1.4 Credit terms ................................................................................. .4 3
5.1.5 Credit evaluation ............................................................................ 44
5.1.6 Credit recovery approach ................................................................. .45
5.1.7 Duration given to borrowers ............................................................... 46
5.2 Conclusion ...................................................................................... 47
5.3 Recommendations ............................................................................. .48
APENDICES ....................................................................................... 49
APPENDIX I-REFERENCES .......................................................... ................ 49
APPENDIX II-INSTRUMENTS .......................................................................... 50
QUESTIONAIRES TO THE CLIENTS ............................................................. 56
INETERVIEW GUIDE ................................................................................... 59
APENDIX III-TIME SCHEDULE ............................................................ 60
APENDIX IV-ESTIMATED BUDGET .............................................. ....................... 61
ABSTRACT The study aimed at assessmg the effects of credit policies on the perfonnance of micro finance institutions in Equity Bank of Uganda taking the case study to be Wandegeya branch. The study mainly looked at credit risk policy and the perfonnance of Equity bank and to find out whether this policy was effective to the bank. For effectiveness of the research, the researcher used a research design and data collection and analysis were used to arrange the infonnation in such a way that enabled the researcher to come up with the reliable recommendations and conclusions. Different methodologies were employed which were research design, study population, sample design, research instruments and analysis of data where the researcher used pie charts and presentations done in bar graphs. It was realized that the performance of any microfinance institution depends on its existing credit policy at any given time period thus Equity bank use credit policy to evaluate credit worth ness of its customers hence this has enabled the bank to run smoothly and effectively. It was also found out that Equity bank uses credit rating policy which helps them to rate the credit worth ness of its customers. Credit rating also helps the bank to reduce the defaulters of the bank. It was also revealed that the bank uses credit evaluation where this looks at the in-depth analysis in a client's application. It is the duration it takes a client to access the funds from the time an application on credit facility is tendered in to the time the bank disburses the loan. It is hue that majority of the clients take a month for their Joan to be approved from Equity bank thus is seen when the customer has met all the requirements needed by the bank.
